New Delhi

Rating agency ICRA has indicated that the Reserve Bank of India (RBI) is likely to maintain an extended pause on policy rates going forward, unless economic growth weakens significantly below projections. The assessment comes after the central bank delivered an unexpected repo rate cut at a time when both GDP and inflation remain favourable.

In its report, ICRA said the current easing phase is likely over, noting: “Any further rate easing would only be likely if there is a material downward undershooting in growth outcomes, which leads to a cut in growth projections… we believe that today’s rate cut is the final one in the current easing cycle.”

According to the report, the Monetary Policy Committee’s downward revision in CPI inflation estimates was anticipated. The rating agency pointed out that part of the inflation moderation observed in October 2025 came from GST rate reductions across several CPI categories, which helped soften core inflation excluding gold—not because of weaker demand.

ICRA added that the favourable impact of recent tax cuts is expected to keep CPI inflation contained through the second quarter of FY 2027.

The RBI has lowered its inflation projection for 2025–26 to 2.0 per cent, compared to 2.6 per cent estimated in October and 4.2 per cent in February. The central bank has also revised upward its real GDP growth outlook for 2025–26 to 7.3 per cent.

In addition, the RBI announced an infusion of durable liquidity in December 2025 through an open market purchase of government securities worth ₹1 trillion and a USD/INR three-year $5-billion buy-sell swap auction. ICRA said the move should support monetary transmission as well as government bond yields.

RBI Governor Sanjay Malhotra described the current macroeconomic environment as a “rare goldilocks period,” with the economy experiencing strong growth alongside exceptionally low inflation. “We approach the new year with hope, vigour and determination to further support the economy and accelerate progress,” he said.

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The remarks followed the RBI’s decision to cut the repo rate by 25 basis points to 5.25 per cent after a three-day policy review.